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MEMORANDUM

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									                                                                             2550 M Street, NW
                                                                             Washington, DC 20037
                                                                             202-457-6000
                                                                             ____________
                                                                             Facsimile 202-457-6315

MEMORANDUM
To:            Clients and Friends
Date:          December 29, 2010
Subject:       Supplement to Our Prior Memorandum on Small Business Lending
               Initiative


On October 15, 2010, we prepared a comprehensive Memorandum which analyzed in detail the
provisions of the Small Business Jobs Act of 2010 (the "Act"). The Act created a $30 billion Small
Business Loan Fund (SBLF), and is intended to provide for eligible participating financial
institutions to receive from the SBLF a non-dilutive investment made by the US Treasury on very
favorable terms. Significantly, the Treasury's investment, which will be in the form of non-
cumulative, senior perpetual preferred stock, will constitute Tier 1 regulatory capital, and does not
carry the additional requirements that were associated with the TARP program (such as restrictions
on executive compensation). The investment is NOT part of the TARP program and, for
participating financial institutions which still have TARP funds, may be used to retire such funds.
As set forth in greater detail in both our original Memorandum and in the materials noted below, the
price that a participating institution pays for SBLF funding will be reduced (through the dividend
rate paid on the Treasury's preferred stock investment) as the institution's small business lending
increases.

The Act required the Treasury to issue rules and instructions for institutions seeking to apply to
participate in the SBLF program as well as to provide specific information on the nature and terms
of the instrument that eligible participating institutions would issue to the Treasury.

The Treasury late last week posted various documents relating to the SBLF. These documents
consist of:

1.      a Fact Sheet;

2.      a Comprehensive Getting Started Guide;

3.      a Summary of Preferred Terms;

4.      a Summary of Preferred Terms for CPP or CDCI Refinancing;

5.      an Application Form and Instructions; and

6.      a Lending Plan Form and Guide.

We have attached below a link to the Treasury's web site which contains each of the six (6)
documents referenced above:
http://www.treasury.gov/resource-center/sb-programs/Pages/Small-Business-Lending-Fund.aspx
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Set forth below are a few of our comments and observations gleaned from these materials which
should be helpful in furthering an understanding of these documents and their requirements.

1.     The deadline for submission of an application to the Treasury should be no later than
March 30, 2011.

2.      While the application is to be submitted to the Treasury, the required Small Business
Lending Plan should be submitted to the primary federal banking regulator and state regulator, if
applicable, and NOT to the Treasury. In accordance with specific instructions, the Small Business
Lending Plan is required to address the needs of small businesses in its communities, the projected
increase in small business lending and a description of its community outreach which will
accompany the program.

3.     As Treasury did with the TARP program, it intends to develop and issue separate guidance
for Subchapter S corporations and mutual institutions that wish to participate in the program.

4.     (a) For institutions which participated in the Capital Purchase Program (CPP) or the
Community Development Capital Initiative (CDCI) and still have such investments outstanding,
they may apply to refinance such investments.

        (b) To be eligible to refinance, an institution must be in material compliance with all of the
terms, conditions and covenants of its CPP or CDCI agreement, must be current in its dividend
payments to the Treasury and must previously have missed not more than one (1) dividend
payment. All unpaid dividends for the period up to the closing date must be paid, plus any accrued
and unpaid dividends, in connection with the SBLF closing.

         (c) Of importance, ALL outstanding CPP or CDCI securities must be refinanced or
otherwise repaid in full at the time of the refinancing, as it will not be possible to be participants in
both the SBLF program and the CPP or CDFI programs at the same time. Since the amount of
eligible investment in the SBLF fund will not be increased to accommodate the outstanding
liquidation preference on CPP and CDFI securities, institutions which have liquidation preferences
on such securities that are greater than the amount of SBLF investment they will be eligible to
receive will have to make alternative arrangements to repay such amounts of CPP or CDFI securities
that are not being refinanced by the SBLF investment, which must be accomplished as of the time
of the SBLF closing. Any warrants issued to the Treasury at part of the CPP or CDFI program will
continue to be outstanding unless they are independently repurchased. No new warrants are required
to be issued in connection with the SBLF program.

5.     SBLF funding can be repaid at any time with the permission of the applicable regulator, in
increments of at least 25% of the initial funding amount.

6.      The level of funding that an eligible institution may receive, how amounts of qualifying small
business lending is calculated and the associated dividend payments that will be paid to the Treasury
on the outstanding investment is each determined under somewhat complicated formulas set forth
in the materials put out by the Treasury.

7.     Institutions which apply will either be preliminary approved, preliminarily approved
provided that the institution obtains matched funding or not approved.

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8.     In connection with closing an SBLF transaction, the Treasury will appoint a law firm to
represent it in connection with both a Letter Agreement and Securities Purchase Agreement
between the Treasury and the participating institution.

9.       Participating institutions will have ongoing certification and reporting obligations during the
life of the SBLF investment.

In addition to the foregoing, the Act requires each of the federal banking agencies to issue guidance
regarding prudent underwriting standards for small business loans that are to be made with SBLF
funds by SBLF participating institutions. The guidance issued by each of the federal banking
agencies is the same and, accordingly, we attach below a link to the FDIC release:

http://www.fdic.gov/news/news/financial/2010/fil10090.html

We would be pleased to talk further with you about the SBLF program and how we can be of
assistance.

                                           #     #    #    #

This Memorandum is provided by Patton Boggs LLP for educational and informational
purposes only and is not intended and should not be construed as legal advice. This
Memorandum is considered advertising under applicable state laws.



                     Norman B. Antin                   Jeffrey D. Haas
                     nantin@pattonboggs.com            jhaas@pattonboggs.com
                     (202) 457-6514                    (202) 457-5675




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